Global markets were choppy overnight, as gains in Apple and other tech stocks offset a slump in energy shares and worries about an escalating trade war between Washington and its trading partners.
The Australian and Chinese share markets in particular traded cautiously yesterday ahead of the July 6 deadline when the United States is set to impose further import tariffs on Chinese goods. US tariffs on $US34 billion worth of Chinese goods are set to kick in, posing the risk of a strong response from Beijing.
Stock in Focus: EBOS Group (EBO:NZ / EBO:AX)
EBOS Group (EBO) was the best performer on the NZ market yesterday, jumping +7% and touching a new record high. The surge came as the pharmaceutical and animal health products maker won a bid for a distribution deal with Australia's Chemist Warehouse which it said could bring in A$1 billion of revenue in the first year.
The two companies expect to sign a five-year supply agreement, starting July 2019, which could potentially be extended by three years, after EBOS won the tender to be the exclusive third-party distributor of pharmaceutical products to over 400 Chemist Warehouse and My Chemist stores in Australia.
The deal is clearly big for EBOS, and not only should it improve earnings, but also further diversifies EBOS’s business. We have been supporters of the company for some time now and believe EBOS have a strong track record of delivering on growth opportunities and expanding through sensible acquisitions, while the company also fits into our healthcare investment theme.
We currently have a BUY recommendation on EBOS.
Members should look out for a full update on EBOS to be released in tomorrow’s weekly report.
Australia & New Zealand Market Movers
The Australian share market was lower on Monday (ASX 200 index -0.27%) with mild losses made by index heavyweights across sectors on the first day of the new fiscal year. Shares opened higher but declined throughout the day, led lower by the banks and resource stocks. In stock news, Sigma Healthcare shares fell -40%, hitting 7-year lows after the pharmacy operator announced it had lost a supply contract with Chemist Warehouse and cut its earnings forecast. Village Roadshow announced the sale of the Wet'n'Wild Sydney water park to Spanish international entertainment operator Parques Reunidos for $40 million.
The New Zealand market was virtually flat on Monday (NZX 50 index -0.00%) in light trading. Fonterra and Trade Me were lower, while EBOS Group surged on a new deal which could bring A$1 billion in revenue in its first year. In other stock news, Steel & Tube shares rose as it obtained a waiver from its banks after writedowns and impairments put it in breach of at least one lending covenant..
3 Things Markets Will be Watching this Week
1. Ongoing trade disputes, particularly as tariff measures between the US and China continue to sway investor sentiment.
2. The Reserve Bank of Australia makes an interest rate decision on Tuesday.
3. Important monthly US employment figures are published at the end of the week
Have a Great Day,
Team
